TN 2 (02-08)
SL 60001.681 How Social Security Coverage is Affected in Various Predecessor-Successor Situations
Proper handling of predecessor-successor situations is affected by the State Social Security Administrator’s timely reporting to the Social Security Administration when the situations occur.
With the legal dissolution of the consolidating entities (along with notices of dissolution to remove them from the State’s Section 218 Agreement, see SL 40001.485) and the creation of a new entity, the employee positions of the new entity are new positions, and procedures for implementing new coverage must be undertaken if the entity wants Social Security coverage. The former coverage modifications are no longer applicable, and new modifications are needed to provide Social Security coverage for:
Absolute Coverage Group (positions not covered by a retirement system) – If modifications for the absolute coverage groups are not submitted, then the mandatory Social Security provisions apply to those non-retirement system positions.
Deemed Retirement System (Social Security coverage provided to the retirement system on an entity-by-entity basis) – For those positions under a deemed retirement system, the consolidated entity must first hold a coverage referendum in order to provide Social Security coverage.
Single Retirement System – If the consolidated entity has positions in a retirement system that obtained Social Security coverage as a single retirement system via a single statewide referendum for members of the system in all political subdivisions having positions under that system, those single retirement system positions would retain their Social Security coverage. A referendum would not be necessary. An identification modification (SL 40001.490, Exhibit 6) must be provided to inform the Social Security Administration that the new entity’s positions are to be included under the retirement system’s existing Section 218 coverage modification.
Note: When dealing with any of these consolidation, hybrid consolidation or miscellaneous transition situations, it is extremely important to discern whether the retirement system involved obtained Social Security coverage as a single statewide retirement system or on an entity-by-entity deemed retirement system basis.
The employees of the entity or entities being annexed become the employees of the entity which continues in existence. In this case, the Social Security coverage status of the annexed employees depends on the Social Security coverage status of the entity which continues in existence.
If School District A annexes School District B, the former School District B employees would now be considered School District A employees and would be subject to whatever Social Security coverage that is already in effect for existing School District A employees.
With the legal dissolution of the entity or entities being annexed, the State must submit notice(s) of dissolution to remove them from the State’s Section 218 Agreements; but no new Section 218 coverage modification is necessary for the entity that continues to exist. If the annexation results in a name change for the continuing entity, a notice should be submitted to the Social Security Regional Office concerning the name change (SL 40001.475).
C. Hybrid Consolidation
The positions of the predecessor entities that were folded into the newly created entity are treated in the same way that absolute coverage group, deemed retirement system group, and single retirement system group positions are treated in consolidation situations.
The State must submit notice(s) of dissolution to the Social Security Administration to delete from the State’s Section 218 Agreement the legally dissolved predecessor entity or entities that completely ceased to exist due to the hybrid consolidation.
The coverage modifications for those entities that dissolved are no longer applicable for the absolute coverage and deemed retirement system group positions that were folded into the newly created successor governmental entity. Social Security coverage is obtained for those employees by the following:
1. Absolute Coverage Group
A new coverage modification is needed to provide Social Security coverage for the absolute coverage group, or else, the mand